Ch 14 terms

Question 1

define perfect competition

Answer 1

market in which many sellers of identical goods are all price takers
free entry and exit
no impact
many buyers

Question 2

how to calculate total revenue

Answer 2

P x Q

Question 3

how to calculate avg rev

Answer 3

total rev/Q
avg rev equals price

Question 4

how to calculate marginal rev

Answer 4

change in total rev/change in Q

Question 5

how to find perfect competition profit/loss on graph

Answer 5

y axis: vertical difference between ATC curve and MC curve
x axis: quantity produced

Question 6

define exogenous variables

Answer 6

inputs (exo means out)

Question 7

define endogenous variables

Answer 7

outputs (endo means in)

Question 8

define shutdown

Answer 8

temporary decision to produce nothing
due to market conditions
still have to pay fixed costs

Question 9

define sunk cost

Answer 9

cost already spent that should be excluded from decision making

Question 10

equation for long run choice to enter

Answer 10

P> ATC

Question 11

equation for long run choice to leave market

Answer 11

TR<TC or P< ATC

Question 12

why do firms stay with 0 profit?

Answer 12

they have 0 economical profit
accounting wise making money

Question 13

2 reasons long term supply might slope up

Answer 13

1. production resources in limited q
2. firms have different costd